Include SSP and SMP in pension-relief earnings

changelog.d/2371.fixed.md

@@ -0,0 +1 @@
+- Included statutory sick and maternity pay in the relevant earnings limits for pension contribution relief and annual-allowance income tests.

policyengine_uk/parameters/gov/hmrc/income_tax/reliefs/pension_contribution/README.md

@@ -1 +1,19 @@
 # Pension contributions
+
+Relevant UK earnings for pension contribution relief include employer-paid,
+taxable statutory sick pay and statutory maternity pay. The model holds these
+payments in `employment_benefits`, separately from `employment_income`, and
+includes that aggregate once when limiting relief. Pension income does not
+increase the relevant-earnings limit. The existing age limit, relief-at-source
+basic amount and nonnegative trading-profit rules still apply.
+
+This follows [Finance Act 2004 section 189](https://www.legislation.gov.uk/ukpga/2004/12/section/189)
+and [HMRC PTM044100](https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100).
+The annual monetary inputs represent actual employer-paid taxable payments;
+they do not establish statutory-pay eligibility or identify exceptional payments
+made directly by HMRC in survey data.
+
+Statutory paternity pay still depends on the separate change in
+[PR #2368](https://github.com/PolicyEngine/policyengine-uk/pull/2368) to include it
+in the taxable employment aggregate. This change addresses the existing SSP/SMP
+omission in issue #2371; it does not complete that issue's SPP dependency.

policyengine_uk/tests/policy/baseline/gov/hmrc/pensions/statutory_pay_pension_relief.yaml

@@ -0,0 +1,243 @@
+# Actual employer-paid annual SSP/SMP, occupational net-pay member contributions,
+# and an already-awarded defined-benefit pension where specified.
+# FA 2004 s. 189 and HMRC PTM044100: statutory employment pay is relevant earnings.
+
+- name: SSP final ordinary tax
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    region: LONDON
+    age: 60
+    employment_income: 20000
+    statutory_sick_pay: 2000
+    statutory_maternity_pay: 0
+    self_employment_income: 0
+    private_pension_income: 20000
+    employee_pension_contributions_reported: 22000
+    personal_pension_contributions: 0
+  output:
+    employment_benefits: 2000
+    employee_pension_contributions: 22000
+    pension_contributions_relief: 22000
+    personal_pension_contributions_tax: 0
+    income_tax: 1486.0
+
+- name: SMP relief cap
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    region: LONDON
+    age: 35
+    employment_income: 20000
+    statutory_sick_pay: 0
+    statutory_maternity_pay: 2000
+    self_employment_income: 0
+    private_pension_income: 0
+    employee_pension_contributions_reported: 22000
+    personal_pension_contributions: 0
+  output:
+    employment_benefits: 2000
+    employee_pension_contributions: 22000
+    pension_contributions_relief: 22000
+    personal_pension_contributions_tax: 0
+    income_tax: 0.0
+
+- name: Still capped at all relevant earnings
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    region: LONDON
+    age: 60
+    employment_income: 20000
+    statutory_sick_pay: 2000
+    statutory_maternity_pay: 0
+    self_employment_income: 0
+    private_pension_income: 20000
+    employee_pension_contributions_reported: 25000
+    personal_pension_contributions: 0
+  output:
+    employment_benefits: 2000
+    employee_pension_contributions: 25000
+    pension_contributions_relief: 22000
+    personal_pension_contributions_tax: 0
+    income_tax: 1486.0
+
+- name: Contributions already covered
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    region: LONDON
+    age: 60
+    employment_income: 20000
+    statutory_sick_pay: 2000
+    statutory_maternity_pay: 0
+    self_employment_income: 0
+    private_pension_income: 20000
+    employee_pension_contributions_reported: 12000
+    personal_pension_contributions: 0
+  output:
+    employment_benefits: 2000
+    employee_pension_contributions: 12000
+    pension_contributions_relief: 12000
+    personal_pension_contributions_tax: 0
+    income_tax: 3486.0
+
+- name: Equal amount as wages
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    region: LONDON
+    age: 60
+    employment_income: 22000
+    statutory_sick_pay: 0
+    statutory_maternity_pay: 0
+    self_employment_income: 0
+    private_pension_income: 20000
+    employee_pension_contributions_reported: 22000
+    personal_pension_contributions: 0
+  output:
+    employment_benefits: 0
+    employee_pension_contributions: 22000
+    pension_contributions_relief: 22000
+    personal_pension_contributions_tax: 0
+    income_tax: 1486.0
+
+- name: Pension is not relevant earnings
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    region: LONDON
+    age: 60
+    employment_income: 20000
+    statutory_sick_pay: 0
+    statutory_maternity_pay: 0
+    self_employment_income: 0
+    private_pension_income: 20000
+    employee_pension_contributions_reported: 22000
+    personal_pension_contributions: 0
+  output:
+    employment_benefits: 0
+    employee_pension_contributions: 22000
+    pension_contributions_relief: 20000
+    personal_pension_contributions_tax: 0
+    income_tax: 1486.0
+
+- name: Age75 exclusion retained
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    region: LONDON
+    age: 75
+    employment_income: 20000
+    statutory_sick_pay: 2000
+    statutory_maternity_pay: 0
+    self_employment_income: 0
+    private_pension_income: 20000
+    employee_pension_contributions_reported: 22000
+    personal_pension_contributions: 0
+  output:
+    employment_benefits: 2000
+    employee_pension_contributions: 22000
+    pension_contributions_relief: 0
+    personal_pension_contributions_tax: 0
+    income_tax: 5886.0
+
+- name: RAS basic amount retained
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    region: LONDON
+    age: 40
+    employment_income: 1000
+    statutory_sick_pay: 0
+    statutory_maternity_pay: 1000
+    self_employment_income: 0
+    private_pension_income: 0
+    employee_pension_contributions_reported: 0
+    personal_pension_contributions: 3600
+  output:
+    employment_benefits: 1000
+    employee_pension_contributions: 0
+    pension_contributions_relief: 3600
+    personal_pension_contributions_tax: 0
+    income_tax: 0.0
+
+- name: Positive trading profit
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    region: LONDON
+    age: 60
+    employment_income: 20000
+    statutory_sick_pay: 2000
+    statutory_maternity_pay: 0
+    self_employment_income: 5000
+    private_pension_income: 20000
+    employee_pension_contributions_reported: 27000
+    personal_pension_contributions: 0
+  output:
+    employment_benefits: 2000
+    employee_pension_contributions: 27000
+    pension_contributions_relief: 27000
+    personal_pension_contributions_tax: 0
+    income_tax: 1486.0
+
+- name: Trading losses do not offset statutory employment pay for relief
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    age: 60
+    employment_income: 20000
+    statutory_sick_pay: 2000
+    self_employment_income: -5000
+    employee_pension_contributions_reported: 25000
+  output:
+    pension_contributions_relief: 22000
+
+# Supplied ANI is an explicit input contract. Restore the same actual pension
+# relief for equal total relevant earnings, regardless of the SSP wage split.
+- name: Supplied ANI all-wages annual allowance control
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    region: LONDON
+    age: 50
+    employment_income: 22000
+    statutory_sick_pay: 0
+    statutory_maternity_pay: 0
+    self_employment_income: 0
+    employee_pension_contributions_reported: 22000
+    personal_pension_contributions: 0
+    employer_pension_contributions: 0
+    pension_contributions_via_salary_sacrifice: 0
+    adjusted_net_income: 5000
+  output:
+    employment_benefits: 0
+    pension_contributions_relief: 22000
+    net_income: 27000
+    pension_contributions_for_annual_allowance: 22000
+    pension_annual_allowance_threshold_income: 5000
+    pension_annual_allowance_adjusted_income: 27000
+
+- name: Supplied ANI SSP preserves annual allowance earnings base
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    region: LONDON
+    age: 50
+    employment_income: 20000
+    statutory_sick_pay: 2000
+    statutory_maternity_pay: 0
+    self_employment_income: 0
+    employee_pension_contributions_reported: 22000
+    personal_pension_contributions: 0
+    employer_pension_contributions: 0
+    pension_contributions_via_salary_sacrifice: 0
+    adjusted_net_income: 5000
+  output:
+    employment_benefits: 2000
+    pension_contributions_relief: 22000
+    net_income: 27000
+    pension_contributions_for_annual_allowance: 22000
+    pension_annual_allowance_threshold_income: 5000
+    pension_annual_allowance_adjusted_income: 27000

policyengine_uk/utils/pensions.py

@@ -3,6 +3,19 @@
 from policyengine_uk.utils.supplied_inputs import supplied_input
 
 
+def relevant_uk_earnings(person, period):
+    """FA 2004 s.189 earnings, including employer-paid taxable SSP/SMP.
+
+    Statutory employment pay is held separately from wages. A trading loss
+    does not reduce those employment earnings (HMRC PTM044100).
+    """
+    return (
+        person("employment_income", period)
+        + person("employment_benefits", period)
+        + np.maximum(0, person("self_employment_income", period))
+    )
+
+
 def pension_contributions_relief_amount(
     contributions, relevant_uk_earnings, ras_contributions, age, hmrc
 ):
@@ -39,11 +52,7 @@ def annual_allowance_net_income(person, period, parameters):
     returned = person("salary_sacrifice_returned_to_income", period)
     hmrc = parameters(period).gov.hmrc
     actual_member_contributions = person("pension_contributions", period) - returned
-    actual_earnings = (
-        person("employment_income", period)
-        - returned
-        + np.maximum(0, person("self_employment_income", period))
-    )
+    actual_earnings = relevant_uk_earnings(person, period) - returned
     supplied_ani = supplied_input(person, "adjusted_net_income", period)
     if supplied_ani is not None:
         # Supplied ANI already determines net income, including its losses.

policyengine_uk/variables/gov/hmrc/pensions/pension_annual_allowance_threshold_income.py

@@ -2,6 +2,7 @@
 from policyengine_uk.utils.pensions import (
     annual_allowance_net_income,
     pension_contributions_relief_amount,
+    relevant_uk_earnings,
 )
 
 
@@ -37,11 +38,7 @@ def formula(person, period, parameters):
         # actual member contributions. Its relief need not equal the returned
         # amount: after 75 there is none, and low earnings can use basic RAS.
         actual_member_contributions = person("pension_contributions", period) - returned
-        actual_earnings = (
-            person("employment_income", period)
-            - returned
-            + max_(0, person("self_employment_income", period))
-        )
+        actual_earnings = relevant_uk_earnings(person, period) - returned
         relief = where(
             returned > 0,
             pension_contributions_relief_amount(

policyengine_uk/variables/gov/hmrc/pensions/pension_contributions_relief.py

@@ -1,5 +1,8 @@
 from policyengine_uk.model_api import *
-from policyengine_uk.utils.pensions import pension_contributions_relief_amount
+from policyengine_uk.utils.pensions import (
+    pension_contributions_relief_amount,
+    relevant_uk_earnings,
+)
 
 
 class pension_contributions_relief(Variable):
@@ -14,6 +17,8 @@ class pension_contributions_relief(Variable):
         "above earnings (s. 191(7)); the model takes personal pension "
         "contributions as relief at source and employee contributions as a "
         "net pay arrangement. The annual allowance does not limit relief. "
+        "Relevant employment earnings include employer-paid taxable statutory "
+        "pay through employment_benefits. "
         "Contributions above it can be relieved here and separately attract "
         "the annual allowance charge (personal_pension_contributions_tax) "
         "under s. 227. The charge need not equal their tax relief."
@@ -36,21 +41,19 @@ class pension_contributions_relief(Variable):
             title="Finance Act 2004 s. 191",
             href="https://www.legislation.gov.uk/ukpga/2004/12/section/191",
         ),
+        dict(
+            title="HMRC PTM044100: relevant UK earnings",
+            href="https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100",
+        ),
     ]
     unit = GBP
 
     def formula(person, period, parameters):
         hmrc = parameters(period).gov.hmrc
         contributions = person("pension_contributions", period)
-        # Relevant UK earnings (s. 189(2)) are employment income and trading
-        # income. A trading loss gives no relevant earnings; it does not
-        # reduce employment income.
-        relevant_uk_earnings = person("employment_income", period) + max_(
-            0, person("self_employment_income", period)
-        )
         return pension_contributions_relief_amount(
             contributions,
-            relevant_uk_earnings,
+            relevant_uk_earnings(person, period),
             person("personal_pension_contributions", period),
             person("age", period),
             hmrc,